A Value Stock With a Dividend Yield Over 9% to Buy Near 52-Week Lows

In this piece, we’ll check in on one of the more popular names to go bottom-fishing in. With a dividend yield currently hovering just north of 10%, Telus (TSX:T) really does stand out as a blue-chip darling to give yourself a nice raise.

Of course, Telus used to be a go-to market darling for dividend investors. In many ways, it still is a great dividend heavyweight to keep buying on the way down. After all, as the price goes lower and that yield starts marching ever higher, the risk/reward becomes that much better as income investors look to get more payout for a lower price of admission.

While Telus’s tough industry climate and company-facing pressures are really nothing new, I must admit that I never saw shares of Telus yielding over 10%. That’s obscenely high and seems to suggest that a reduction is imminent. Of course, that’s not the case, especially as the firm looks to turn the tide and reduce expenses in other areas while investing in other efforts that could help jolt cash flows in the future.

Will pivoting to AI data centres work out?

Indeed, it seems like getting into the business of AI data centres is the hot new way to unlock next-level growth. Of course, I’m not so sure how to feel about a telecom titan getting into the space. For investors, though, they don’t seem all that enthused. And that’s probably because of the significant capital expenditure requirements for getting a ticket into the space. Just look at the Magnificent Seven hyperscalers that are spending a huge sum to advance the effort.

The names are surely not being rewarded for their unfathomable spending. Indeed, it can be difficult to get a grasp of just how much the hyperscalers are pouring into AI and data centres. Hundreds of billions is quite a bit.

Of course, all other firms with data centre ambitions are getting dwarfed by these hyperscaler juggernauts. And for Telus, it’s still in the pre-season when it comes to AI data centres. So, don’t expect it to be a timely needle mover. Though, it is fun to think about for longer-term investors. But, nevertheless, there’s a huge cloud of uncertainty surrounding AI infrastructure, and whether big bets mean a bigger payoff from clients who are effectively renting AI compute.

Given that Telus is an expert with optical connectivity and infrastructure, I’d argue that the firm’s talents translate well in the data centre space. Either way, that won’t reduce the CapEx needed to advance the cause, and with a massive dividend commitment to meet, perhaps Telus has some difficult decisions to make. Not all paths forward have to end in a dividend cut, though.

Fortunately, there might be relief on the horizon, as the company does its best to save in other areas. Operational trim via AI integration and automation — something that I’ve commented on in numerous prior pieces — might just allow Telus to keep its dividend promise to investors while investing opportunistically in efforts that could beef up cash flows. I guess the big question is whether cutting operational overhead is enough to allow that dividend to hold up while the company undergoes one of the most-watched transformations in the industry.

What about the dividend?

For now, the payout is covered, but there’s not a ton of wiggle room. Though, that could change with time, especially as free cash flows move in the right direction. If rates stay as they are or move lower (maybe tough job numbers and a technical recession could do it), the long-term debt load might be more manageable than one would think. In short, I think Telus has a path higher, and its dividend might just stay intact.

The post A Value Stock With a Dividend Yield Over 9% to Buy Near 52-Week Lows appeared first on The Motley Fool Canada.

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More reading

• What’s the Deal With Telus’s Dividend?
• All it Takes is $5,000 Invested in Each of These 3 Dividend Stocks to Help Generate Nearly $1,100 in Passive Income in 2026
• The Stock I’d Pick Over Telus and BCE – And Why I Keep Coming Back to It
• Forget Telus: A Cheaper Dividend Stock With More Growth Potential
• How Splitting $30,000 Across 3 TSX Stocks Could Generate $2,820 in Annual Dividend Income

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.